By Geoffrey Smith
Investing.com -- The great freeze in Texas continues, pushing oil prices to fresh 13-month highs. Bond yields also ht 12-month highs as the reflation trade gathers strength. Warren Buffett trims his bet on Apple (NASDAQ:AAPL) and plows money into Verizon (NYSE:VZ) and Chevron (NYSE:CVX). Retail sales and industrial production data are due. Here’s what you need to know in financial markets on Wednesday, February 17th.
1. Texas still frozen; oil hits 13-month high
The energy crisis affecting Texas dragged on into its fourth day, with hundreds of thousands of households and businesses across the state left without power.
Grid operator ERCoT said late on Tuesday it “is restoring load as fast as we can in a stable manner,” but noted that it expected outages to last until well into Wednesday.
“Generating units across fuel types continue to struggle with frigid temperatures,” it added.
Contrary to early reports blaming the outages principally on the failure of the state’s wind turbines, it is now clear that all sources of power were affected by the cold snap. Moreover, numerous power stations took themselves offline rather than pay surging spot prices for natural gas, which current regulation forbids them from passing on to consumers. Gas supply was affected not only by frozen well-heads, but also by higher demand that led to a drop in pipeline pressure.
Crude oil prices remain at elevated levels due to the loss of Texas’ oil production. U.S. crude futures were up 0.9% at $60.94 a barrel, while Brent was up 1.1% at $64.06.
2. Reflation trades hit bonds
Yields on U.S. Treasury bonds hit their highest in nearly a year after President Joe Biden underlined a looming supply deluge by promising again to “spend big” to support the economic recovery from the pandemic.
The 10-year note yield rose as high as 1.33% before retreating to 1.29% as of 6:30 AM ET (1130 GMT). The 30-year yield peaked at 2.11% before coming back to 2.06%. With short rates locked at or near zero by the Federal Reserve, the yield curve is now at its steepest in years.
While higher yields have lifted the dollar index to its highest in a week, they haven’t stopped continued bets on fiat currency depreciation. The price of Bitcoin rose another 5% to $51,500.
3. Stocks set to open lower; Shopify, Hilton earnings due
U.S. stock markets are set to take a breather at the opening after posting new records on Tuesday, helped by a strong performance from energy stocks on the back of what is likely to be only a temporary cold snap.
By 6:30 AM ET, Dow Jones futures were down 11 points – less than -0.1% - while the S&P 500 futures contract was down 0.1% and NASDAQ futures were down 0.2%.
Shopify (NYSE:SHOP), Analog Devices (NASDAQ:ADI) and Hilton International top the earnings slate for the day, with Marathon Oil (NYSE:MRO) and lithium miner Albemarle (NYSE:ALB) reporting after the close.
4. Buffett trims Apple stake to bet on Chevron, Verizon, Marsh
Warren Buffett trimmed his bet on Apple and plowed some of the proceeds into multibillion dollar bets on Chevron, Verizon and insurance broker Marsh & McLellan, according to an SEC filing released by Berkshire Hathaway (NYSE:BRKa) after the close on Tuesday.
Berkshire’s stake in Verizon (NYSE:VZ), the U.S.’s largest cell carrier, was worth $8.6 billion as of December 31, while its stake in Chevron (NYSE:CVX) amounted to $4.1 billion, the filing showed.
Berkshire remains the biggest institutional investor in Apple (NASDAQ:AAPL) with a stake worth $120 billion.
5. Retail sales, industrial production due
The data calendar picks up again today after a brief lull. The most important number will be retail sales for January at 7:30 AM ET, which are expected to show the scars of extensive lockdowns at the start of 2021. They’re still expected to grow for the first time in four months, with analysts forecasting a gain of 1.1%.
Out 45 minutes later at 8:15 AM ET are industrial production data for January. That’s expected to have risen for a fourth straight month, albeit at a slower rate of 0.5%. Regional surveys such as the Empire State Manufacturing Index, which came out on Tuesday, have generally been stronger than expected.
The National Association of Home Builders will also release its monthly report on house prices.
Overnight, the extent of lockdown damage was again evident in a 26% annual drop in European auto sales in January.